All of us commit mistakes. Do you know a person who doesn’t commit errors or mistakes in their jobs, family or their own life? Personally, I don’t know such kind of person.
In the same language, all of us are prone to money mistakes. It may cause us small amount of money or worst, millions of pesos.
But mistakes can be avoided. Prevention of mistakes can be tough at first but it will become easier as the time goes by and as your discipline develops.
In this post, I would like to list some of the common money mistakes that any person could do with your own money. I hope this article will help you avoid these worst mistakes and use your money in more beneficial way. Here are the 5 worst money mistakes that you should avoid.
1. Paying minimum payment for your credit card bill
Credit card is good and can give you lots of benefits when use properly. However, using it improperly will give you headache.
Paying minimum payment for credit card bill is not a good practice. As much as possible, you should always strive to pay the full amount of your bill. Why? Because of the very high interest that will be added on your next billing.
I suggest you make a rule when using your credit card. The first rule you should adopt is to pay the whole billing amount every month. Don’t overuse your credit card for impulse buying and luxuries. Remember that every time you use your credit card, you are getting debt.
Do you know how much is added in the unpaid balance? Usually the interest rate charges by the bank fall more than 4% interest every month. It is definitely high so you should avoid it as much as you can.
2. Taking a payday loan
A payday loan is a loan applied by some people who are employed and wants to use their paycheck ahead of time because of emergency needs or other purposes. The payment money will be coming from the paycheck.
This kind of loan charges high interest rate compared than a regular loan by the bank but it is easier to be approved. Actually, there are many companies offering this kind of service and the application is easy because you can do it via online.
3. Investing with lack of understanding and studying
Always remember that the first rule in investing is understand what you are buying or investing. For example, if you don’t know how to invest in stocks, you should study first how stock works and what are the related risks involve. There are many resources around the web about investing in stocks and most of them are free. You don’t need to buy expensive books or be a member of an organization to learn stocks.
The simple way to learn stock investing is following my blog or any other blogs that tackle this kind of topic. You are rest assured that the information you are getting are true based on the experiences and lessons learned by bloggers like me who invests in stock market.
What is the result of investing without proper knowledge and studying? The simple answer: loss of the money you invested. Perhaps, you might fall in a scam or you will quickly sell your shares even you lose some amount of money.
Therefore, it is very important to know and study what you are investing. There are also many scams and frauds right now disguising as legitimate investment. But you should beware of those things; you must learn to research the things you are investing.
4. Putting all of your money in savings account
Savings account is not bad. However, putting all of your money into it is bad. Though savings account has insurance from the government, still it is not a good idea to put majority of your money into savings account.
You should look for other better ways to put your money, those things that will earn higher profit than SA. A good allocation of your money would be 50% on savings account and 50% on investments like stocks, mutual funds, ETF, business and others.
It is good to have money in your SA in case of emergency situations and it can be easily liquidated or withdrawn. So it is also important to put a portion of your money on savings or emergency account that you can withdraw easily.
5. Spending more than what you earn
Last time, I have published a post about the best financial advice that I can give and it tells about spending less than what you earn. I think this is the fundamental lesson of personal finance that every person must follow and adopt.
When you spend more than what you earn, you are getting debt from your credit card or other person. Perhaps you spend more because of many things that you want to buy and you can’t control it. I suggest that you should learn how to avoid impulse buying and plan where you must spend your money.
It is not bad to spend what you labor for. The bad thing is you spend more than what you are earning to the point you are forced to borrow money from other people or use your credit card.
Mistakes can be prevented if you are willing to do it. All of us are prone to commit errors especially in handling our money so it is important to remember the things I listed above to help you use your money wisely.
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